The market for "lemons" is one in which

Question

Quizplus · Accepted Answer

The market for "lemons" refers to a situation where there is information asymmetry between buyers and sellers, leading to issues such as rational buyers discounting the value of goods due to uncertainty (A), sellers making claims that cannot be verified at the point of purchase (B), a scenario where lower-quality products (the bad apples) drive out higher-quality ones because of the inability of buyers to distinguish between them (C), and the problem of adverse selection, where the presence of lower-quality goods (lemons) in the market causes a mismatch between the products offered and the products buyers believe they are purchasing (D). All these elements (A, B, C, D) are characteristics of a market for "lemons," making E the correct answer.

The Market for "Lemons" Is One in Which